Will AI innovations topple Alphabet's market leadership?

The latest driver of tech returns globally has been Generative AI. Alphabet has pioneered many algorithms that help train large language models. However, with the dramatic entry of ChatGPT backed by Microsoft, Alphabet appears to have lost some of its sheen. Its attempt to launch Bard, the answer to ChatGPT, was marred by the engine generating incorrect answers. This was embarrassingly repeated, with its successor Gemini generating incorrect images of the Moon landing depicting a woman and an African American. Not surprisingly, Alphabet's stock price has languished compared to other similar technology leaders. Investor concerns In mid-2023, Bernstein, a US brokerage firm, put out a report downgrading Alphabet. The key issues it highlighted were: Google's position in Search was under threat. Vertical-specific searches, particularly in retail, were increasingly being carried out on Amazon, Meta and other social media platforms, chipping away at Google's once-dominant dominance. The company attempted to defend itself by integrating AI into search, as had been done by Microsoft, but with much less success. Meanwhile, the cost of developing the AI engine continued to remain steep. YouTube faced incremental competition from TikTok, and the Connected TV market was set to erode the ad dollars that You

This article was originally published on May 01, 2024.